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Research Archive

China is an important market for U.S. firms, but policies outlined in the 13th Five-Year Plan seek to create new Chinese competitors that will be able to challenge U.S. companies abroad while slowly closing market opportunities in China for U.S. and other foreign firms in important high-tech sectors such as biopharmaceuticals, robotics, and aviation. This staff report analyzes the 13th Five-Year Plan, the Chinese government’s most important strategy to address its economic, social, and environmental challenges over the next five years, focusing on key national targets (including subsequently announced localization and innovation targets), market access commitments, and its implications for the U.S. employment, innovation, and economic growth.02/14/2017

In December 2016, Sao Tome and Principe—a country consisting of a group of islands and islets off the western coast of central Africa—broke diplomatic relations with Taiwan, and re-established diplomatic relations with China. The issue brief describes what happened, what it means for Taiwan, and how it fits into a series of measures that Beijing has taken to pressure Taiwan since the election of Taiwan’s President Tsai Ing-wen.
•This is the second time since President Tsai’s election that Beijing has re-established diplomatic relations with one of Taipei’s former diplomatic partners—of which it now has only 21—marking a change in Beijing’s behavior. In 2008, Taipei and Beijing reached a tacit understanding to stop competing for recognition from each other’s diplomatic partners—a “diplomatic truce.” During the period that followed, Beijing also rejected overtures from several of Taiwan’s diplomatic partners to establish diplomatic relations with China.
•Taiwan’s diplomatic relationships are significant for symbolic and practical reasons. Although, Taiwan almost certainly gains more from its unofficial relations with countries that have extensive international influence, such as the United States, diplomatic relations are an important component of Taiwan’s toolbox for maintaining a presence on the international stage.
•Despite President Tsai’s pragmatic approach to cross-Strait relations and attempts to compromise, Beijing views her with suspicion due to her unwillingness to endorse the “one China” framework for cross-Strait relations. Other measures that Beijing has taken to pressure Taipei since President Tsai’s election include suspending official and semiofficial cross-Strait communication and meetings and excluding Taiwan from meetings of international organizations, among others.
02/09/2017

Highlights of this Month’s Edition: • Bilateral trade: The U.S. trade deficit declined to $347 billion in 2016, a 5.5 percent decrease year-on-year, due to weakened imports; U.S. service exports hit a record high, aided by increased Chinese tourism spending in the United States. • Bilateral policy issues: U.S. firms operating in China in 2016 report similar levels of profitability, but perceive a decline in the overall investment environment driven in part by concerns over China’s discriminatory and restrictive regulatory policies. • Quarterly review of China’s economy: China’s GDP growth hit 6.7 percent in 2016, supported by higher government spending and record bank lending; President Xi Jinping talks up globalization at Davos amid bleak exports. • Policy trends in China’s economy: Chinese government’s continued efforts to battle capital outflows are bearing fruit; China instructs Internet providers to end unauthorized VPN use and establishes funds for information infrastructure and development of domestic Internet companies. • Sector focus – Aluminum: U.S. government tightens antidumping and countervailing duties and launches a WTO case to fight China’s excess aluminum production.02/07/2017

Mass quantities of fentanyl, a low-cost and highly potent synthetic drug, are being produced in China and brought illegally to the United States, contributing to a growing U.S. opioid crisis. The rise of fentanyl in the United States can be traced back to China’s large chemical and pharmaceutical industries, which manufacture vast quantities of the drug and its analogues to export to the western hemisphere with little regulatory oversight. This report examines how China’s illicit chemical production and inefficient U.S. and international counternarcotic efforts have contributed to dramatic increases in fentanyl-related deaths in the United States.02/01/2017

Highlights of this Month’s Edition
•Bilateral trade: U.S. exports to China rise 14.1 percent year-on-year in November 2016, the largest increase since December 2013. Cumulative yearly trade with China and the U.S. goods trade deficit continue to decline year-on-year.
•Bilateral policy issues: China launches complaint at the WTO against the United States and EU over market economy status; the United States challenges Chinese grain tariff rate quotas at the WTO; WTO talks to finalize the Environmental Goods Agreement collapsed, due in part to China’s last-minute submission of a new product list.
•Policy trends in China’s economy: Capital outflows continue, forcing the Chinese government to spend down reserves and reinstitute capital controls to maintain the exchange rate; a new directive issued by the Chinese government prohibits social media sites from streaming videos on current events from non-government-approved sources.
01/09/2017

China’s Beidou satellite navigation system—one of the country’s top space projects and only the fourth system of its kind currently in development or operation—is projected to achieve global coverage by 2020. This report examines the objectives behind Beijing’s decision to develop the system as an alternative to GPS, its efforts to build an industry around the system, and the effects this might have in security, economic, and diplomatic terms for the United States. The system’s primary purpose is to end China’s military reliance on GPS, although China’s associated industrial policies will likely affect U.S. firms operating in China’s market. Industry professionals assess there are no inherent risks to products such as smartphones receiving data from Beidou.01/05/2017

The report examines the rapidly increasing foreign direct investment by China in the United States and how the unprecedented level of investment, especially in sensitive sectors, raises new considerations for lawmakers regarding U.S. national and economic security. This report was prepared for the Commission by the Rhodium Group. 12/08/2016

Highlights of this Month’s Edition •Bilateral trade: U.S. exports to China jump 11.3 percent year-on-year in October 2016, leading to a smaller deficit. •Bilateral policy issues: At JCCT, China pledges to open entertainment sector to the United States, but U.S. concerns over Chinese biotechnology rules remain unaddressed. •Policy trends in China’s economy: China has passed a broad new cybersecurity law aimed at tightening government control over information flows and technology products, sparking complaints from foreign business and rights advocacy groups; Lou Jiwei replaced as Minister of Finance, raising concerns about China’s commitment to economic reform.
• Sector focus – Singles’ Day and E-Commerce: Singles’ Day sets new record for online sales amid the continued rise of electronic transactions in China, offering new market opportunities for foreign firms.
12/06/2016

The report examines the growth of China’s robotics industries and its development of unmanned industrial, service, and military systems, such as drones and driverless cars. The report assesses the economic and national security implications of these trends for the United States.10/25/2016

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The research papers in this section were prepared at the request of the Commission to support its deliberations. They are posted to the Commission’s website in order to promote greater public understanding of the issues addressed by the Commission in its ongoing assessment of U.S.-China economic relations and their implications for U.S. security, as mandated by P.L. 106-398 and P.L. 108-7. Their posting to the Commission’s website does not imply an endorsement by the Commission or any individual Commissioner of the views or conclusions expressed in them.

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The U.S.-China Economic and Security Review Commission was created by the United States Congress in October 2000 with the legislative mandate to monitor, investigate, and submit to Congress an annual report on the national security implications of the bilateral trade and economic relationship between the United States and the People’s Republic of China, and to provide recommendations, where appropriate, to Congress for legislative and administrative action.